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What is the sales tax?

Sales tax is also colloquially referred to as value added tax. German sales tax is basically levied on all services provided by a company in Germany against payment. Measured by its revenue, turnover tax is one of the most important taxes in the Federal Republic of Germany

In particular, the following are subject to turnover tax

  • supplies (e.g. sales of goods) and other services (e.g. services) which are carried out in the course of business activities in Germany against payment.
  • the importation of goods from a third country into the country (the import turnover tax incurred in the process is levied by customs) and
  • the intra-Community acquisition (purchase of goods from the other countries of the European Union, the Community territory).

There are two tax rates, the general rate of 19% and the reduced rate of 7%. The reduced rate of 7% applies in particular to transactions for basic needs, e.g. food, books, newspapers, cultural events, travel on local public transport.

The VAT Act contains an extensive catalogue of services that are exempt from VAT. These include

  • Turnover from activities as a doctor, dentist or non-medical practitioner,
  • Turnover from activities as a building society or insurance agent,
  • Turnover from the sale, rental and leasing of real estate,
  • the granting of loans,
  • Supplies of goods to other EU Member States,
  • Export deliveries to countries outside the EU.

Note

You can also find more information on VAT in the "Tax tips" and "Brochures" provided by the Ministry of Finance Baden-Württemberg under"Publications". You can also obtain information from your tax office.

The legal basis for the levying of VAT is the Value Added Tax Act.

 

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